How to Set Yourself Up for Big Profits This Earnings Season

Marc Lichtenfeld|October 16, 2020

Editor’s Note: As Andy wrote yesterday, we’re heading into a pivotal earnings season…

Companies unhurt by – or boosted by – the pandemic and shutdown will see their stock prices soar…

But for others, the fall will be severe…

Our good friend Marc Lichtenfeld – Chief Income Strategist at The Oxford Club – wants to help you sort this earnings season’s top winners from the biggest losers in his Blockbuster Earnings Season Kickoff on October 21 at 1 p.m. ET.

At this entirely free virtual event, he’ll show you not just how to weather this coming earnings season but also how you could triple your investment in as little as three months.

Click here to learn more.

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Companies have started reporting third quarter results. We’ll soon find out which companies are set to soar and which are poised for a crash.

For long-term investors, earnings season is a good time to look at the companies in their portfolios and see how they performed over the last several quarters. Then, they can decide whether it makes sense to continue holding the stocks.

For shorter-term investors or traders, earnings seasons can supercharge their returns. These reports can get the party started as stocks take off on better-than-expected results.

And this earnings season is especially critical. Between COVID-19, interest rate and analyst cuts, and the election, the divide between successful and unsuccessful companies will be larger than ever before.

So will the opportunities to profit if you know how to take advantage…

Trick or Treat

Consider what happened last year at the end of a normal earnings season.

On December 5, 2019, retailer Express (NYSE: EXPR) popped 28% in one day after reporting surprisingly good results. It went on to climb a total of 60% higher in four days over the closing price before earnings came out.

And shortly after, Ciena (NYSE: CIEN) jumped 20% in one day after reporting better-than-expected numbers.

Trading on earnings isn’t easy, but it can be very profitable if you do it right. Here are a few things you can do to lower your risk while trying to trade for big profits during earnings season…

• Use a trailing stop. Stocks can not only jump higher on strong earnings but also fall on weak ones. Have a trailing stop in place so that if a trade goes against you, you’ll get out with a manageable loss.
• Don’t let a trade become an investment. Trailing stops help with this. The last thing you want is for a short-term trade based on a specific catalyst to languish in your portfolio for months.If the stock is moving higher, great. Let your winners run, and use the stop to exit when the ride is over.But if the trade goes bad, get out. The catalyst you bought it for has passed, and there is no longer a reason to hold it.
• Buy calls instead of stock. Calls will allow you to risk less money upfront and capture a larger percentage gain if the trade works out. If it doesn’t, you’ll lose less cash.
• Buy protective puts. If you own the stock, you can use puts as insurance to protect your position. If the stock tumbles, your puts will cover some or all of your losses.If not, you’ll have spent a little bit of money on an insurance policy you didn’t have to cash in, which isn’t the worst thing in the world.

If you put these strategies to work, you may be able to score big profits despite 2020’s challenges. Just be sure to take steps to protect yourself so you can go into earnings season with the best chance of making money… and the least chance of losing it.

P.S. With the right steps, your portfolio can make it through the next several months and come out even stronger on the other side.

Click here to save your spot in my Blockbuster Earnings Season Kickoff and learn more.

Are you excited for or nervous about this earnings season? Tell us about it at mailbag@manwardpress.com.